Equites Property Fund is executing a phased exit from its United Kingdom property portfolio, which once comprised 40% of its asset base.
Equites Property Fund is steadily unwinding its British footprint, a strategic pivot that began in 2022 after deteriorating financial conditions in the United Kingdom eroded property values. In its interim results for the first half of the 2027 financial year, the company reported strong progress in its withdrawal from the region, where it previously built a substantial portfolio between 2016 and 2022.
The catalyst for the retreat was a sharp rise in capital costs driven by elevated inflation and state financial mismanagement. Surging interest rates eliminated the positive yield spread that made the British portfolio profitable, while UK leases—bound by restrictive five-year rent review periods—prevented landlords from passing those higher costs on to tenants quickly.
Disposing of the Aviva Portfolio and Cutting UK Holdings
The exit strategy involves systematically selling individual assets and entire sub-portfolios. In the first half of the 2027 financial year, Equites completed the sale of its Aviva Portfolio, offloading five UK properties for £200.5 million, which translates to R4.39 billion, according to Dailyinvestor.
That transaction yielded £95 million, or R2 billion, in cash earmarked for deployment back home. With that milestone cleared, Equites has only three assets remaining in the United Kingdom, and management expects to sell those off before the end of 2028.
The proceeds have also helped strengthen the company’s balance sheet. Equites lowered its loan-to-value ratio from a peak of 39.7% in 2023 down to 28.1% in the 2027 financial year.
Reinvesting in South Africa’s Logistics Sector
Rather than dumping capital blindly into underperforming local assets, Equites has taken a measured approach. Because the sheer scale of the UK divestments means local opportunities cannot always absorb the cash instantly, the company temporarily parks funds in shares of UK-based real estate companies, selling down those stakes as South African projects materialize.
The primary destination for the capital is South Africa’s logistics property market, which is benefiting from the expansion of e-commerce and structural challenges within the country’s railway network. According to Dailyinvestor, the sector features structural supply deficits and near-zero vacancy rates.
Equites targets pre-let developments and sale-and-leaseback agreements, partnering with blue-chip retailers such as Shoprite and The Foschini Group, as well as freight operators like Digistics and DHL. To maintain a pipeline for modern distribution centres, the fund acquires land parcels along major industrial corridors in Gauteng, the Western Cape, and KwaZulu-Natal.
Unlike the rigid five-year review structures in Britain, South African commercial leases incorporate annual contractual escalations. This provides predictable growth and allows property funds to absorb rising capital costs far more effectively.
